Right con­cerns, wrong tar­get

of 100% of as­set man­ager Stan­lib, the in­vest­ment house formed through the 2002 merger of the old SCMB’s as­set man­age­ment busi­ness and Lib­erty As­set Man­age­ment, makes sound busi­ness sense. It of­fers Lib­erty full con­trol of a large as­set man­ager and an ex­ten­sive suite of unit trust funds, plus the con- sider­able dis­tri­bu­tion chan­nel of Stan­dard Bank. That’s prob­a­bly why 97% of Lib­erty’s share­hold­ers voted in favour of the deal. So why all the fuss at the meet­ing to ap­prove the R1,57bn ac­qui­si­tion?

Apart from what seem like valid claims of poor dis­clo­sure in the cir­cu­lar to share­hold­ers, the real is­sue is Lib­erty Hold­ings (Lib­hold), the out­dated pyra­mid struc­ture used as a ve­hi­cle by Stan­dard Bank to con­trol Lib­erty. The bank owns 55% of Lib­hold, which in turn holds just over 50% of Lib­erty.

This struc­ture was one of the is­sues raised by feisty mi­nor­ity share­holder Roy McAlpine, for­mer Lib­erty di­rec­tor and for­mer boss of Lib­erty As­set Man­age­ment.

The pyra­mid hold­ing com- pany will re­main a con­cern that needs to be ad­dressed. But it had lit­tle to do with the Stan­lib deal, or with the board of Lib­erty, that none­the­less picked up lots of flak around Lib­hold amid sug­ges­tions that Stan­dard Bank was re­ally call­ing the shots and that the Lib­erty board was in­ef­fec­tual.

This, not sur­pris­ingly, is seen as un­fair by Lib­erty CEO

Bruce Hem­phill: “I un­der­stand peo­ple’s frus­tra­tion around Lib­hold, but to sug­gest that the Lib­erty board does not act in the in­ter­est of its mi­nor­ity share­hold­ers and that Stan­dard Bank calls the tune is a slight on the board.”

On poor dis­clo­sure in the cir­cu­lar, Hem­phill con­cedes that on face value it per­haps could have been bet­ter. He says de­tailed fi­nan­cial state­ments for Stan­lib were ex­cluded, not least for com­pet­i­tive rea­sons, but that any share­holder tak­ing a look at Lib­erty’s fi­nan­cial state­ments can see the ef­fect of Stan­lib. “But maybe we were un­fair and placed too much onus on the re­tail in­vestor.”

An­other com­plaint by McAlpine was that the merger that formed Stan­lib should never have hap­pened in the first place. It’s a moot point, but it’s also hard to dis­agree that Stan­lib to­day is very dif- fer­ent to the merged as­set man­ager of five years ago. For in­stance, profit be­fore tax has gone from about R100m then to R400m to­day.

Hem­phill’s man­age­ment team has only been in place since the mid­dle of last year, so it’s un­fair to sug­gest it dragged its feet over re­vers­ing the deal McAlpine says should never have hap­pened. The Stan­lib deal was ini­ti­ated by Hem­phill, who ap­proached Stan­dard Bank. It didn’t want to sell but could also see the sense be­hind the trans­ac­tion, so agreed on con­di­tion Lib­erty shares were part of the pay­ment, to al­low the bank to re­tain ex­po­sure to Stan­lib.

It’s also not that widely known that Stan­dard Bank has given Lib­erty an un­der­tak­ing to stay out of as­set man­age­ment and unit trusts in Africa. That adds value to the Stan­lib deal.

But Lib­hold is not go­ing to go away. It’s un­der­stand­able that Lib­erty feels it’s get­ting un­fair crit­i­cism for the con­trol struc­ture that it can’t con­trol. Per­haps Stan­dard Bank mi­nori­ties need to be tested on Lib­hold.